UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
DC 20549




FORM
10-Q




(Mark
One)




x
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934




For the
quarterly period ended March 31,
2010




 ̈
            TRANSITION REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




For the
transition period from 
to




Commission
File Number:  000-53643




Aurios
Inc.


(Exact
name of registrant as specified in its charter)




Arizona
                86-1037558(State
      or other jurisdiction of incorporation or organization)
                (I.R.S.
      Employer Identification
No.)




1741 W. University Drive, Suite
146


Tempe,
AZ 85281


(Address
of principal executive offices)




(602)
321-1313


(Registrant’s
telephone number, including area code)











Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the issuer was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days.     x
Yes    ̈
No




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files.    ̈
Yes   ̈
No




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer,” “non-accelerated filer,” and “a smaller reporting company”
in Rule 12b-2 of the Exchange Act.




Large
      accelerated filer  ̈
            Accelerated
      filer  ̈Non-accelerated
      filer  ̈  (Do
      not check if a smaller reporting company)
            Smaller
      reporting company x




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).  ̈ Yes x No




Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date:




Class
                  
                  Outstanding at May 14, 2010Common
      Stock, no par value
                  
                  3,678,000










FORM
10-Q


AURIOS
INC.


March
31, 2010


TABLE
OF CONTENTS





PagePART I – FINANCIAL
    INFORMATIONItem
      1.
                                                              Financial
      Statements.
                                                              
                                                              1Condensed
      Balance Sheets as of March 31, 2010 (Unaudited) and December 31,
      2009
                                                              
                                                              2Condensed
      Statements of Operations (Unaudited) for the three months ended March 31,
      2010 and 2009
                                                              
                                                              3Condensed
      Statements of Stockholders’ Equity (Deficit) (Unaudited) for the three
      months ended March 31, 2010
                                                              
                                                              4Condensed
      Statements of Cash Flows (Unaudited) for the three months ended March 31,
      2010 and 2009
                                                              
                                                              5Notes
      to Condensed Financial Statements
                                                              
                                                              6Item
      2.
                                                              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations.
                                                              
                                                              11Item
      3.
                                                              Quantitative
      and Qualitative Disclosures About Market Risk.
                                                              
                                                              14Item
      4T.
                                                              Controls
      and Procedures.
                                                              
                                                              14PART II – OTHER INFORMATIONItem
      1.
                                                              Legal
      Proceedings.
                                                              
                                                              15Item
      1A.
                                                              Risk
      Factors.
                                                              
                                                              15Item
      2.
                                                              Unregistered
      Sales of Equity Securities and Use of Proceeds.
                                                              
                                                              15Item
      3.
                                                              Defaults
      Upon Senior Securities.
                                                              
                                                              15Item
      4.
                                                              (Removed
      and Reserved.)
                                                              
                                                              15Item
      5.
                                                              Other
      Information.
                                                              
                                                              15Item
      6.
                                                              Exhibits.
                                                              
                                                              15Signatures
                                                              
                                                              
                                                              16ExhibitsCertifications







PART
I - FINANCIAL INFORMATION





Item 1.
            Financial
      Statements





Our
unaudited condensed financial statements included in this Form 10-Q for the
three months ended March 31, 2010 are as follows:




Condensed
Balance Sheets as of March 31, 2010 (Unaudited) and December 31,
2009




Condensed
Statements of Operations (Unaudited) for the three months ended March 31,
2010 and 2009




Condensed
Statements of Stockholders’ Equity (Deficit) (Unaudited) for the three
months ended March 31, 2010




Condensed
Statements of Cash Flows (Unaudited) for the three months ended March 31,
2010 and 2009




Notes to
Condensed Financial Statements




These
unaudited condensed financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America for
interim financial information and the SEC instructions to Form
10-Q.  In the opinion of management, all adjustments considered
necessary for a fair presentation have been included.  Operating
results for the interim period ended March 31, 2010 are not necessarily
indicative of the results that can be expected for the full
year.


1





AURIOS
INC.


CONDENSED
BALANCE SHEETS





(Unaudited)March 31,
                                
                                
                                December 31,2010
                                
                                
                                2009ASSETSCurrent
      Assets:Cash
      and cash equivalents
                                
                                $
                                17,557
                                
                                
                                $
                                6,676Accounts
      receivable, net
                                
                                
                                -
                                
                                
                                
                                2,932Inventory
                                
                                
                                18,113
                                
                                
                                
                                19,469Total
      Assets
                                
                                $
                                35,670
                                
                                
                                $
                                29,077LIABILITIES
      AND STOCKHOLDERS' EQUITY / (DEFICIT)Current
      Liabilities:Accounts
      payable
                                
                                $
                                60,454
                                
                                
                                $
                                62,396Due
      to related party
                                
                                
                                510
                                
                                
                                
                                1,792Total
      Current Liabilities
                                
                                
                                60,964
                                
                                
                                
                                64,188Long-Term
      LiabilitiesAccrued
      interest
                                
                                
                                12,668
                                
                                
                                
                                11,683Note
      payable - related party
                                
                                
                                44,121
                                
                                
                                
                                44,121Total
      Liabilities
                                
                                
                                117,753
                                
                                
                                
                                119,992Stockholders'
      Equity / (Deficit):Convertible
      preferred stock - no par value; 10,000,000 sharesauthorized,
      0 and  460,000 shares issued and outstandingat
      March 31, 2010  and December 31, 2009,
    respectively
                                
                                
                                -
                                
                                
                                
                                115,000Common
      stock - no par value; 90,000,000 shares authorized,3,678,000
      and 2,400,000 shares issued and outstandingat
      March 31, 2009 and December 31, 2009, respectively
                                
                                
                                197,795
                                
                                
                                
                                50,795Accumulated
      deficit
                                
                                
                                (279,878
                                )
                                
                                
                                (256,710
                                )Total
      Stockholders' Equity/(Deficit)
                                
                                
                                (82,083
                                )
                                
                                
                                (90,915
                                )Total
      Liabilities and Stockholders' Equity / (Deficit)
                                
                                $
                                35,670
                                
                                
                                $
                                29,077





The
Accompanying Notes are an Integral


Part of
the Condensed Financial Statements


2





AURIOS
INC.


CONDENSED
STATEMENTS OF OPERATIONS


(Unaudited)





Three Months EndedMarch 31,2010
                
                
                2009Sales
                
                $
                5,120
                
                
                $
                5,067Cost
      of Sales
                
                
                2,956
                
                
                
                2,973Gross
      Profit
                
                
                2,164
                
                
                
                2,094General
      and Administrative Expenses
                
                
                24,347
                
                
                
                28,699Loss
      from Operations
                
                
                (22,183
                )
                
                
                (26,605
                )Interest
      Expense
                
                
                985
                
                
                
                985985
                
                
                
                985Net
      Loss (Unaudited)
                
                $
                (23,168
                )
                
                $
                (27,590
                )Loss
      per share - basic and diluted
                
                $
                (0.01
                )
                
                $
                (0.03
                )Weighted
      average shares outstanding - basic and diluted
                
                
                2,712,400
                
                
                
                896,000





The
Accompanying Notes are an Integral


Part of
the Condensed Financial Statements


3





AURIOS
INC.


CONDENSED
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY/(DEFICIT)


For
the three months ended March 31, 2010


(Unaudited)





TotalConvertible
                        
                        
                        
                        
                        
                        Stockholders'Common Stock
                        
                        
                        Preferred Stock
                        
                        
                        Accumulated
                        
                        
                        EquityShares
                        
                        
                        Amount
                        
                        
                        Shares
                        
                        
                        Amount
                        
                        
                        Deficit
                        
                        
                        (Deficit)Balance
      at December 31, 2009
                        
                        
                        2,400,000
                        
                        
                        $
                        50,795
                        
                        
                        
                        460,000
                        
                        
                        $
                        115,000
                        
                        
                        $
                        (256,710
                        )
                        
                        $
                        (90,915
                        )Preferred
      stock conversion to commonstock
                        
                        
                        1,150,000
                        
                        
                        
                        115,000
                        
                        
                        
                        (460,000
                        )
                        
                        
                        (115,000
                        )
                        
                        
                        -
                        
                        
                        
                        -Common
      stock issued for cash
                        
                        
                        128,000
                        
                        
                        
                        32,000
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        32,000Net
      loss for the three months ended March 31, 2010 (Unaudited)
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (23,168
                        )
                        
                        
                        (23,168
                        )Balance
      at March 31, 2010 (Unaudited)
                        
                        
                        3,678,000
                        
                        
                        $
                        197,795
                        
                        
                        
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        (279,878
                        )
                        
                        $
                        (82,083
                        )





The
Accompanying Notes are an Integral


Part of
the Condensed Financial Statements


4


AURIOS
INC.


CONDENSED
STATEMENTS OF CASH FLOWS


(Unaudited)





Three Months EndedMarch 31,2010
                    
                    
                    2009Cash
      flows from operating activities:Net
      Loss
                    
                    $
                    (23,168
                    )
                    
                    $
                    (27,590
                    )Adjustments
      to reconcile net loss to net cashused
      by operating activities:Changes
      in Assets and Liabilities:Accounts
      receivable
                    
                    
                    2,932
                    
                    
                    
                    850Inventory
                    
                    
                    1,356
                    
                    
                    
                    2,324Accounts
      payable
                    
                    
                    (1,942
                    )
                    
                    
                    (696
                    )Accrued
      interest-related party
                    
                    
                    985
                    
                    
                    
                    985Due
      to related party
                    
                    
                    (1,282
                    )
                    
                    
                    (300
                    )Net
      cash used by operating activities
                    
                    
                    (21,119
                    )
                    
                    
                    (24,427
                    )Cash
      flows from financing activities:Proceeds
      from issuance of common stock
                    
                    
                    32,000
                    
                    
                    
                    -Net
      cash provided by financing activities
                    
                    
                    32,000
                    
                    
                    
                    -Net
      change in cash and cash equivalents
                    
                    
                    10,881
                    
                    
                    
                    (24,427
                    )Cash
      and cash equivalents at beginning of period
                    
                    
                    6,676
                    
                    
                    
                    43,321Cash
      and cash equivalents at end of period
                    
                    $
                    17,557
                    
                    
                    $
                    18,894Supplemental
      Information:Interest
      paid
                    
                    $
                    -
                    
                    
                    $
                    -Income
      taxes paid
                    
                    $
                    -
                    
                    
                    $
                    -





The
Accompanying Notes are an Integral


Part of
the Condensed Financial Statements


5


AURIOS
INC.


NOTES
TO FINANCIAL STATEMENTS




Note
1


Summary
of Significant Accounting Policies, Nature of Operations and Use of
Estimates





Presentation
of Interim Information




The
accompanying unaudited condensed financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America for interim financial information and with the instructions to Form 10-Q
for smaller reporting companies. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statements and should be read in
conjunction with our December 31, 2009 Annual Report filed on Form 10K. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted, as permitted by the
SEC, although we believe the disclosures made are adequate to make the
information presented not misleading. Further, the condensed financial
statements reflect, in the opinion of management, all normal recurring
adjustments necessary to fairly present our financial position at March 31,
2010 and the results of our operations and cash flows for the periods presented.
The December 31, 2009 condensed balance sheet data was derived from audited
financial statements, but does not include all disclosures required by
accounting principles generally accepted in the United States of America. The
results of operations for the three months ended March 31, 2010 are not
necessarily indicative of the results to be expected for the full
year.




Nature
of Corporation




Aurios
Inc. (the “Company” or “we”) is a corporation which was duly formed and
organized under the laws of the State of Arizona on August 7,
2001.  Its principal business activity is the production, marketing
and distribution of vibration isolation products to the high-end audio and video
market.  The Company’s sales occur throughout the United States and in
certain foreign countries.  The Company is a former wholly-owned
subsidiary of True Gravity Enterprises Inc. (“TGE”). On December 31, 2007, the
principal shareholder, who is also a director and officer of the Company,
purchased all of the stock owned by TGE. On February 25, 2010, TGE sold
substantially all of its assets to Advanced Vibration Technologies Inc., an
Arizona corporation (“AVT”).  Pursuant to a Management and Rental
Agreement between AVT and the Company that expires on July 31, 2010, the Company
pays AVT $1,500 per month for rent and certain management services.




Use
of Estimates




The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that effect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.





Revenue
Recognition




The
Company derives its revenues primarily from the sale of vibration and motion
control devices through sales on the Company’s website and its distributors.
Revenues are recognized at the time the sale is completed and shipped. Once
shipped, title to the products, as well as the risks and rewards of ownership,
passes to the customers.





Advertising
Costs




Advertising
costs are expensed as incurred. Advertising expense for the three months ended
March 31, 2010 and 2009 were $0 and $3,700, respectively.





Cash
and Cash Equivalents





For
financial accounting purposes, cash and cash equivalents are considered to be
all highly liquid investments purchased with an initial maturity of three (3)
months or less.


6




AURIOS
INC.


NOTES
TO FINANCIAL STATEMENTS (Continued)




Note
1


Summary
of Significant Accounting Policies, Nature of Operations and Use of Estimates
(Continued)







Accounts
Receivable




The
Company provides for potentially uncollectible accounts receivable by use of the
allowance method.  The allowance is provided based upon a review of
the individual accounts outstanding and the Company’s prior history of
uncollectible accounts receivable.  As of March 31, 2010 and December
31, 2009 there was no provision for uncollectible trade accounts
receivable.  The Company does not accrue interest charges on
delinquent accounts receivable.  The accounts are generally
unsecured.




Inventory




Inventories
are stated at the lower of cost (first-in, first-out method) or market value. We
regularly assess inventory quantities on hand and record provisions for excess
and obsolete inventory based primarily on our estimated forecast of product
demand. Inventory consists primarily of components used in assembling vibration
control bearings.




Income
Taxes




The
Company files income tax returns in the U.S. federal jurisdiction and the State
of Arizona. The Company is subject to federal, state and local income tax
examinations by tax authorities for approximately the past three years, or in
some instances longer periods.




Deferred
income taxes are provided on an asset and liability method, whereby deferred tax
assets and liabilities are recognized for deductible temporary differences and
operating loss carryforwards. Deferred tax liabilities are recognized for
taxable temporary differences. Deferred tax assets are reduced by a valuation
allowance when it is more likely than not that the carryforwards will not be
utilized. Deferred tax assets and liabilities are adjusted for the effects of
changes in tax laws and rates on the date of enactment.




New
Accounting Pronouncements




In
December 2009, the Financial Accounting Standards Board (“FASB”) issued
Accounting Standards Update (“ASU”) 2009-17, Improvements to Financial Reporting
by Enterprises Involved with Variable Interest Entities (“ASU 2009-17”).
This ASU codified consolidation guidance previously issued in June 2009 which
applies to variable interest entities and affects the overall consolidation
analysis under FASB Interpretation No. 46(R), Consolidation of Variable
Interest Entities. This standard is effective for fiscal years beginning after
November 15, 2009. Our adoption of ASU 2009-17 on January 1, 2010, did
not have an impact on our financial statements.




In
December 2009, the FASB issued ASU 2009-16, Accounting for Transfers of
Financial Assets (“ASU 2009-16”). This ASU codified guidance previously
issued in June 2009 which amends existing derecognition guidance, eliminates the
exemption from consolidation for qualifying special-purpose entities, and
requires additional disclosures about a transferor’s continuing involvement in
transferred financial assets. This standard is effective for fiscal years
beginning after November 15, 2009, and applies to financial asset transfers
occurring on or after the effective date. Our adoption of ASU 2009-16 on
January 1, 2010, did not have an impact on our financial
statements.





Earnings
Per Share




Basic
earnings per share includes no dilution and is computed by dividing income
available to common shareholders by the weighted average number of common shares
outstanding for the period. Diluted earnings per share reflect the potential
dilution of securities that could share in the earnings of an
entity.




As of
March 31, 2009, there were 460,000 shares of Series A Convertible Preferred
Stock convertible into 1,150,000 common shares. These shares were not included
in the determination of diluted earnings per share as their effect was
anti-dilutive. Holders of shares of Series A Convertible Preferred Stock are
entitled to receive dividends as declared from time to time by the board of
directors. Since their issuance, no dividends have been declared on the Series A
Convertible Preferred Stock. On March 9, 2010, the 460,000 shares of Series A
Convertible Preferred Stock were converted into 1,150,000 common
shares.  There were no potentially dilutive securities outstanding as
of March 31, 2010.




On August
31, 2009, the Company approved a 2.5 for 1 stock split of its outstanding common
stock, resulting in 2,240,000 shares of Common Stock outstanding, which has been
reflected retroactively for all periods presented.


7







Note
2
 Related
Party Transactions







The
Company had a balance due to a related party, TGE, in the amount of $0 and
$1,500 at March 31, 2010 and December  31, 2009, respectively. These are
considered short term in nature and non-interest bearing.




The
Company had a note payable to a related party, TGE, in the amount of $44,121 as
of March 31, 2010 and December 31, 2009, bearing interest at a rate of
8.25%. All outstanding principal and interest are due and payable on
December 15, 2011. As of March 31, 2010 and December 31, 2009, there
was accrued interest in the amount of $12,668 and $11,683,
respectively.




In July
2007 the Company entered into a non-exclusive License Agreement with a related
party, TGE, giving the Company rights in various patents, pending applications
for patents and trademarks in various countries of the world, including the
United States. The Company pays the related party five percent (5.0%) of
worldwide net sales of the licensed products. In October 2007, the License
Agreement was amended to provide that the royalty would begin to accrue on
January 1, 2008. This agreement was terminated on February 25, 2010 as a
result of the sale of substantially all of TGE’s assets to AVT.  As of
March 31, 2010 and December 31, 2009, the accrued royalty the Company owed
to TGE was $510 and $292, respectively. The Company now pays royalties to AVT
under a new agreement with AVT.




TGE
shares common management with the Company and both the Company and TGE have the
same majority owner.




During
the three months ended March 31, 2010 and 2009, the Company paid $4,687 and
$485, respectively, in legal services to a firm in which a principal stockholder
of Aurios is a partner. He also performed or supervised the legal services
rendered by his law firm.




On
February 25, 2010, TGE, the Company’s affiliate and former parent, sold
substantially all of its assets to AVT.




The
Company and TGE, its affiliate and former parent, entered into an administrative
services/rental agreement on January 1, 2009. Under such agreement, TGE
performed certain administrative duties for Aurios and provided it office space
as required at $1,500 per month. Aurios has no employees and had contracted with
TGE for all services. Paul Attaway controls TGE as its principal shareholder,
and an officer and director.  This agreement was terminated on
February 25, 2010 as a result of the sale of substantially all of TGE’s assets
to AVT.  As of February 25, 2010, AVT provides administrative support
and personnel to the Company at $1,500 per month under an administration
services/rental agreement that expires on July 31, 2010. During the first
quarter ended March 31, 2010, the Company paid a fee of$3,000to TGE to compensate it
for administrative expenses and the use of TGE’s facilities from January 1, 2010
to February 25, 2010.




On March
26, 2010, TGE, the Company’s affiliate and former parent, assigned the Company
its federally registered trademark “Aurios” in consideration for a payment of
$100.




On March
25, 2010, Paul Attaway, an officer and director of the Company, purchased 48,000
shares of common stock for $0.25 per share for a total of $12,000 in the
Company's private placement of common stock.





On March
26, 2010 and March 29, 2010, Ira J. Gaines and Christian J. Hoffmann, III,
respectively, both of whom are principal shareholders of the Company, each
purchased 40,000 shares of common stock for $0.25 per share for a total of
$10,000 in the Company's private placement of common stock.


8


AURIOS
INC.


NOTES
TO FINANCIAL STATEMENTS (Continued)




Note
3


Concentration
of Credit Risk







The
Company maintains cash accounts at a financial institution. Deposits not to
exceed $250,000 are insured by the Federal Deposit Insurance Corporation. At
March 31, 2010 and December 31, 2009, the Company had no uninsured cash and
cash equivalents.





For the
three months ended March 31, 2010 and 2009, the Company had 92% and 91% of sales
to two customers, respectively. As of March 31, 2010 and December 31, 2009
receivables from these customers were $0 and $2,931,
respectively.




Note
4


Stockholders
Equity







On March
9, 2010, 460,000 shares of Series A Convertible Preferred Stock were converted
into 1,150,000 common shares.





Common
Stock:




On
September 27, 2007, the Company amended its Articles of Incorporation to
authorize the Company to issue up to 90,000,000 shares of no par value Common
Stock.




On August
31, 2009, the Company approved a 2.5 for 1 stock split, which resulted in
2,240,000 shares of Common Stock outstanding, which has been reflected
retroactively for all periods presented.




Additionally,
on August 31, 2009, the Company commenced a private placement of a minimum of
80,000 shares and a maximum of 400,000 shares of its Common Stock to accredited
investors at a price of $0.25 per share. As of March 31, 2010, the Company had
sold 288,000 shares, for gross proceeds of $72,000, under the private
placement.




Stock
Options:




The
Company, under its 2007 Stock Option Plan, is authorized to grant options for up
to 250,000 shares of common stock, no par value. Options may be granted as
incentive stock options or nonqualified stock options. Incentive stock options
shall not be granted at less than one hundred percent (100%) of the fair
market value of the common stock on the date of the grant, and have exercise
terms of up to ten years with vesting periods determined at the discretion of
the Company’s board of directors. As of March 31, 2010 no stock options have
been granted.


9


AURIOS
INC.


NOTES
TO FINANCIAL STATEMENTS (Continued)







Note
5
 Income
Taxes







The
provisions for income tax expense consist of the following:


March 31,2010
                      
                      
                      2009Deferred:Income
      tax benefit at statutory rates
                      
                      $
                      9,000
                      
                      
                      $
                      10,800Valuation
      allowance of net operating loss
                      
                      
                      (9,000
                      )
                      
                      
                      (10,800
                      )$
                      -
                      
                      
                      $
                      -





The
Company’s deferred tax asset consists of the following:





March 31,2010
                      
                      
                      2009Deferred
      tax asset:Net
      operating loss carryforward
                      
                      $
                      96,800
                      
                      
                      
                      47,600Less:  Valuation
      allowance
                      
                      
                      (96,800
                      )
                      
                      
                      (47,600
                      )Net
      deferred tax asset
                      
                      $
                      -
                      
                      
                      $
                      -





During
the year ended December 31, 2006 and through June 30, 2007, the net
operating loss carryforward was consolidated by TGE pursuant to a tax sharing
agreement. No intercompany receivable was recorded due to the uncertainty of the
utilization of the net operating loss carryforward by TGE.




The loss
carryforwards, unless utilized, will expire at various times from 2027 through
2030.





Note
6
 Going
Concern







The
Company has incurred an accumulated deficit and has had negative cash flows from
its operations. Realization of the Company’s assets is dependent upon the
Company’s ability to meet its future financing requirements and the success of
future operations. These factors raise substantial doubt about the Company’s
ability to continue as a going concern. The financial statements do not include
any adjustments that might be necessary if the Company is unable to continue as
a going concern.




No
assurances can be given that the Company will be able to raise additional
capital, when needed or at all, or that such capital, if available, will be on
terms acceptable to the Company.  In the event the Company is unable
to raise additional funds, it could be required to either substantially reduce
or terminate its operations.




Currently
the Company has no extensive expansion plans that would require significant
infusions of capital into its operations.


10


Item
2.           Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.




Forward-Looking
Statements




This
Report on Form 10-Q contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. The words “believe,” “expect,” “anticipate,” “intend,”
“estimate,” “may,” “should,” “could,” “will,” “plan,” “future,” “continue” and
other expressions that are predictions of or indicate future events and trends
and that do not relate to historical matters identify forward-looking
statements. These forward-looking statements are based largely on our
expectations or forecasts of future events, can be affected by inaccurate
assumptions, and are subject to various business risks and known and unknown
uncertainties, a number of which are beyond our control. Therefore, actual
results could differ materially from the forward-looking statements contained in
this document, and readers are cautioned not to place undue reliance on such
forward-looking statements. We undertake no obligation to publicly update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise. A wide variety of factors could cause or contribute
to such differences and could adversely impact revenues, profitability, cash
flows and capital needs. There can be no assurance that the forward-looking
statements contained in this document will, in fact, transpire or prove to be
accurate.




Factors
that could cause or contribute to our actual results to differ materially from
those discussed herein or for our stock price to be adversely affected include,
but are not limited to: (i) our history of declining operating results; (ii) our
auditors have expressed a going concern opinion; (iii) our ability to raise
additional working capital that we may require and, if available, that such
working capital will be on terms acceptable to us; (iv) our ability to implement
our business plan; (v) uncertainties regarding our ability to increase revenues
and penetrate our market; (vi) economic and general risks relating to business;
(vii) our ability to manage our costs of production; (viii) our ability to
protect our intellectual property through patents and other intellectual
property protection; (ix) our dependence on key personnel; (x) increased
competition or our failure to compete successfully; (xi) our ability to keep
pace with technological advancements in our industry; (xii) our ability to
comply with Sarbanes-Oxley Act of 2002 Section 404; (xiii) our nonpayment of
dividends and lack of plans to pay dividends in the future; (xiv) future sale of
a substantial number of shares of our common stock that could depress the
trading price of our common stock lower our value and make it more difficult for
us to raise capital; (xv) our additional securities available for issuance,
which, if issued, could adversely affect the rights of the holders of our common
stock; (xvi) the price of our stock is likely to be highly volatile because of
several factors, including a relatively limited public float; and (xvii)
indemnification of our officers and directors.




As used
in this Report, the terms “we,” “us,” “our,” and “Aurios” mean Aurios Inc.
unless otherwise indicated.




General




The
following discussion should be read in conjunction with our Financial Statements
and notes thereto. The following discussion contains forward-looking statements,
including, but not limited to, statements concerning our plans, anticipated
expenditures, the need for additional capital and other events and circumstances
described in terms of our expectations and intentions. You are urged to review
the information set forth under the captions for factors that may cause actual
events or results to differ materially from those discussed below.




Overview




We
produce, market and distribute vibration isolation products to the high-end
audio and video markets in the United States and in certain foreign countries.
Our products include three bearings: the Aurios Classic Media Isolation
Bearing (the “Classic MIB”), the Aurios Pro Max Media Isolation Bearing (the
“Pro Max MIB”), and the Aurios Isotone Media Isolation Bearing (the “Isotone
MIB”); the Series 100 Component Shelf, a shelf product; and Pivot Points, a
spike mount product. We sell the last of the foregoing bearings products to one
distributor and it is a variation of the Classic MIB. The manner in which the
bearings alter body wave transmissions is a function of material selection,
surface harness and material volume, to name just a few of the parameters that
will impact how the sound is reproduced.




The Pro
Max MIB replaces the Aurios Pro bearing, and is engineered to offer the same
performance at an attractive wholesale price of between $250 and $349 for a
package of three. The size of the Pro Max MIB is approximately one inch high and
two and one-half inches in diameter. The Pro Max MIB:




•
            re-configures
      the effective mass of the original Pro bearing and adds 2% more mass to
      the critical wave pathway;




•
            reduces
      the critical surface contact areas by 25%, thus enhancing the level of
      decoupling; and


11




•
            reduces
      costs through its new symmetrical
design.




The Pro
Max MIB is the largest bearing that we offer and is ideal for large speakers.
These bearings can be used in a home, in a recording studio and on stage. The
weight capacity per bearing is 500 lbs (227 kgs). The Pro Max MIB can be used
under DVD/CD players, amps, preamps, turntables and power
conditioners.




The
Classic MIB lacks the girth of the Pro Max MIB bearings. This slimmed down model
is the most popular bearing in the Aurios product line. These bearings are also
placed under amps, preamps, CD/DVD players, turntables, speakers and power
conditioners. The price of the Classic MIB is from $99 to $199 on a wholesale
basis for a box of three.The size of the Classic
MIB is approximately one inch high and one and one-half inches in
diameter.




We also
offer a shelf product,the Series 100 Component Shelf,that incorporates our
bearings products and a spike mount that is used to support equipment and reduce
the effects of vibrations. The shelf product incorporates four bearings, is
placed on the floor and a speaker is placed on the shelf. The Series 100
Component Shelf provides the same level of isolation as our bearings
product.  Our spike mounts, Pivot Points, are used to support
equipment and reduce the effects of vibrations. The Pivot Points product is not
as effective as our Media Isolation Bearing products, but it can be sold at a
much lower price.




Our
annual sales have declined from approximately $255,000 in 2001, on an unaudited
basis, to current levels. The initial downward trend in sales was due to a poor
working relationship with our first distributor. Payment from this first
distributor was slow and we wrote off approximately $75,000 (unaudited) worth of
returned inventory in 2003. We then attempted to sell the product directly and
were not successful. The next distributor we selected was too small to sell a
large quantity of product. By mid-2004, we only had one distributor, located in
Chicago, with whom we continue to work. We have done little to support the
product line since 2004 due to a lack of resources.





For the Three Months Ended
March 31, 2010 and 2009




Results
From Operations




Revenues




Since our
inception, our activities have focused on product and market development with a
nominal level of operations. Revenues for the three months ended March 31, 2010
and March 31, 2009 were $5,120 and $5,067, respectively. Sales for the periods
remained relatively flat and are the result of the current economic
recession.




Most of
our sales are made through audio equipment distributors, with the balance being
direct retail sales. For the period ending March 31, 2010, 69% and 23% of
sales were made through distributors, Bernard Knoop and Music Direct,
respectively. For the period ending March 31, 2009, 68% and 23% of
sales were made through distributors, ECS, Ltd. and Galen Carol,
respectively.  No other customer accounted for more than 10% of sales
in either period.




Cost
of Sales




The cost
of sales on units sold for the three months ended March 31, 2010 totaled $2,956
(57.7% of revenues) on the products, as compared to $2,973 (58.7% of revenues)
for the three months ended March 31, 2009. The cost of sales for the three
months ended March 31, 2010 was slightly lower than for the same period in 2009
due to changes in the product mix sold.




Gross
Margin




Gross
margin for the three months ended March 31, 2010 was $2,164 (42.3% of revenues)
compared to $2,094 (41.3% of revenues) for the three months ended March 31, 2009
due to changes in the product mix sold.




General
and Administrative Expenses




All
general and administrative expenses, as well as research and development
expenses, are incurred through a contractual relationship with TGE that expired
on February 25, 2010 and with Advanced Vibrations Technologies Inc. that
commenced on February 25, 2010 and expires on July 31, 2010, pursuant to
which they perform these services under administrative services
agreements with us. These expenses were $4,500 in the three months ended March
31, 2010 and 2009. In the three months ended March 31, 2010, we had additional
expenses consisting of legal expenses of $4,687 and accounting expenses of
$14,749 related to being publicly held. In the three months ended March 31,
2009, we had additional expenses consisting of legal expenses of $485 and
accounting expenses of $12,266 related to preparing us to become publicly
held.


12




Interest Expense.Interest expense was $985 for both the three months ended March 31, 2010
and 2009.




Income
Tax Provision




The
Company had a potential tax provision benefit of approximately $9,000 and
$10,800 for the three months ended March 31, 2010 and 2009, respectively,
arising from losses generated during the aforementioned periods. The Company has
fully reserved against these benefits due to the uncertainty of their
realization.




Net
Loss




For the
reasons listed above, for the three months ended March 31, 2010 and 2009, we
recorded net loss of $23,168 and $27,590, respectively, a decrease of our net
loss of $4,422.




Basic
and Diluted Loss per Share




The basic
and diluted loss per share were <$0.01> and <$0.03> for the three
months ended March 31, 2010 and 2009, respectively, for the reasons previously
noted.





Liquidity
and Capital Resources




Our
auditors have rendered a going concern opinion. Because our revenues and cash
flow have not increased enough to provide sufficient working capital, we needed
to raise capital through the sale of our equity securities.  We
provided for our cash requirements in the first quarter of 2010 with the capital
we raised from August 2009 to March 2010 through the sale of Common Stock in a
private placement, yielding $72,000 in gross proceeds.




We plan
to use the proceeds from this private placement to pay a portion of our
outstanding payables, expand our promotion and marketing activities, including
for product introduction, and provide working capital.  If the
proceeds from our private placement and cash flow from our operations are not
sufficient to meet our working capital needs, we will need to raise additional
capital through the sale of our debt securities.  We have no
commitments to obtain debt financing and there can be no assurance that we will
be able to obtain the necessary funds or obtain them on terms favorable to
us.  Any future financing may be on terms that substantially dilute
the ownership interests of present shareholders. If we are unable to raise
sufficient additional capital as necessary, we may have to suspend or contract
operations or cease operations entirely.




We do not
anticipate that we will have any large capital requirements over the next twelve
months. In addition, we have relationships with third parties who will
manufacture small quantities of our products quickly and charge us the same
lower prices as we would be charged for larger orders, particularly in the
current economic environment. Accordingly, we believe we can continue to place
smaller orders with a number of such manufacturers at favorable prices and will
not have to allocate our working capital to increase our surplus
inventory.  We work with five manufacturers.




As of
March 31, 2010, we had a working capital deficit of ($25,294) and long-term debt
of $44,121.




Capital
Commitments




We had no
material commitments for capital expenditures.




Off-Balance
Sheet Arrangements




There
were no off-balance sheet arrangements as of March 31, 2010 and March 31,
2009.




Critical
Accounting Policies and Estimates




Our
financial statements are prepared in accordance with U.S. Generally Accepted
Accounting Principles. Preparation of the statements in accordance with these
principles requires that we make estimates, using available data and our
judgment, for such things as valuing assets, accruing liabilities and estimating
expenses. The following is a discussion of what we feel is the most critical
estimate that we must make when preparing our financial statements.




Recoverability of
Inventory.We assume that our inventory can be sold for at least its
carrying cost.


13




Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure




There are
no such disagreements or changes.




Recent
Accounting Pronouncements





In
December 2009, the Financial Accounting Standards Board (“FASB”) issued
Accounting Standards Update (“ASU”) 2009-17, Improvements to Financial Reporting
by Enterprises Involved with Variable Interest Entities (“ASU 2009-17”).
This ASU codified consolidation guidance previously issued in June 2009 which
applies to variable interest entities and affects the overall consolidation
analysis under FASB Interpretation No. 46(R), Consolidation of Variable
Interest Entities. This standard is effective for fiscal years beginning after
November 15, 2009. Our adoption of ASU 2009-17 on January 1, 2010, did
not have an impact on our financial statements.




In
December 2009, the FASB issued ASU 2009-16, Accounting for Transfers of
Financial Assets (“ASU 2009-16”). This ASU codified guidance previously
issued in June 2009 which amends existing derecognition guidance, eliminates the
exemption from consolidation for qualifying special-purpose entities, and
requires additional disclosures about a transferor’s continuing involvement in
transferred financial assets. This standard is effective for fiscal years
beginning after November 15, 2009, and applies to financial asset transfers
occurring on or after the effective date. Our adoption of ASU 2009-16 on
January 1, 2010, did not have an impact on our financial
statements.





Item
3.           Quantitative
and Qualitative Disclosures About Market Risk




A smaller
reporting company is not required to provide the information required by this
Item.




Item
4T.         Controls and
Procedures




Evaluation
of Disclosure Controls and Procedures




We
carried out an evaluation of the effectiveness of the design and operation of
our disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) as of March 31, 2010.  This evaluation was
carried out under the supervision and with the participation of our President,
Chief Executive Officer and Chief Financial Officer, Paul
Attaway.  Based upon that evaluation, he has concluded that, as of
March 31, 2010, our disclosure controls and procedures are
effective.




Disclosure
controls and procedures are controls and other procedures that are designed to
ensure that information required to be disclosed in our reports filed or
submitted under the Exchange Act are recorded, processed, summarized and
reported, within the time periods specified in the SEC’s rules and
forms.  Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that information required
to be disclosed in our reports filed under the Exchange Act is accumulated and
communicated to management, including our Chief Executive Officer and Chief
Financial Officer, to allow timely decisions regarding required
disclosure.




Limitations
on the Effectiveness of Internal Controls




Our
management does not expect that our disclosure controls and procedures or our
internal control over financial reporting will necessarily prevent all fraud and
material error.  Our disclosure controls and procedures are designed
to provide reasonable assurance of achieving our objectives and our Chief
Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures are effective at that reasonable assurance
level.  Further, the design of a control system must reflect the fact
that there are resource constraints, and the benefits of controls must be
considered relative to their costs.  A control system, no matter how
well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met.  Because
of the inherent limitations in all control systems, no evaluation of controls
can provide absolute assurance that all control issues, if any, within a company
have been detected.  Such limitations include the fact that human
judgment in decision-making can be faulty and that breakdowns in internal
control can occur because of human failures, such as simple errors or mistakes
or intentional circumvention of the established process.




Changes
in Internal Control Over Financial Reporting




There
have been no changes in our internal controls over financial reporting during
the quarter ended March 31, 2010 that have materially affected or are reasonably
likely to materially affect such controls.




14




PART
II – OTHER INFORMATION




Item
1.           Legal
Proceedings.




We are
not a party to any pending legal proceeding.  We are not aware of any
pending legal proceeding to which any of our officers, directors, or any
beneficial holders of five percent or more of our voting securities are adverse
to us or have a material interest adverse to us.




Item
1A.        Risk Factors.




A smaller
reporting company is not required to provide the information required by this
Item.




Item
2.           Unregistered
Sales of Equity Securities and Use of Proceeds.




On August
31, 2009, we commenced a private placement of shares of our common stock to
“accredited investors,” as such term is defined in Regulation D promulgated
under the Securities Act of 1933, as amended (“Securities Act”), at a price of
$0.25 per share.  During the first quarter ended March 31, 2010, the
Company has sold 128,000 shares, for gross proceeds of $32,000, under the
private placement. Our officers and directors sold the common stock and we did
not pay any commissions to them in connection with such sales. The shares were
issued in reliance on the exemptions from registration set forth in
Section 4(2) of the Securities Act.




Item
3.           Defaults
upon Senior Securities.




None.




Item
4.           (Removed and
Reserved.)




None.




Item
5.           Other
Information




None.




Item
6.           Exhibits.




Exhibit
                        Number
                      
                      Description of Exhibit31.1
                      
                      Certification
      of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 302 of the Sarbanes-Oxley Act of
  200231.2
                      
                      Certification
      of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 302 of the Sarbanes-Oxley Act of
  200232.1
                      
                      Certification
      of Chief Executive Officer and Chief Financial Officer pursuant to 18
      U.S.C. Section 1350, as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of
2002


15


SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.





Aurios
      Inc.Date:
              May
      17, 2010By:
              /s/ Paul AttawayPaul
      AttawayTitle:
              President,
      Chief Executive Officer, Chief
                Financial
      Officer and Director




16